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It's pretty obvious we are headed for a massive housing and RE bust that will make 2007/2008 look easy.
7% rates are way too high on the average $350K home. Housing prices are coming down in some areas. In other desirable areas with low inventory it's not as relevant and many are paying cash. But I foresee prices dropping severely and trillions of dollars in value evaporating leaving owners and banks upside down in a way we've never seen before.
Maybe, maybe not.
When I graduated high school at 17 In 1981, we launched into so called "Reaganomics"...yup I could get 14% interest on my money market account.
But house mortgages were 18%+.
People still bought houses.
Some bought with an ARM (Adjustable Rate Mortgage) at an already high interest rate, but lower than the prime at the time.
It was pretty much guaranteed it would go up, not down when the introductory rate was over.
Some bought a house at high fixed rates and later refinanced when rates dropped.
In '08 and after, people still bought houses. The ones then in the mist trouble bought a house they couldn't afford with little or no money down. They are the ones who got burned.
A primary residence, without roommates, at least, has no cash flow..the borrower/owner has to provide the cash to flow the mortgage. A slight down turn in the value of the house they bought with little or no money down, and they were immediately "under water'.
The real estate market value in '08 was still higher than in 1988. Real estate values now are higher than in '08.
And still people keep buying.
In 1967 my father used his GI bill to buy his house. Hus interest rate WITH the GI bill in 1967? 5.25%
We paid cash for our new condo, for instance. Did that happen magically, no.
In '08 and after, people still bought houses. The ones then in the mist trouble bought a house they couldn't afford with little or no money down. They are the ones who got burned.
A primary residence, without roommates, at least, has no cash flow..the borrower/owner has to provide the cash to flow the mortgage. A slight down turn in the value of the house they bought with little or no money down, and they were immediately "under water'.
Those who bought quality houses in good neighborhoods of prosperous cities, did admirably well, even if they bought at a most inauspicious time, with expensive financing.. or even if they grossly overpaid. Eventually the market came around.
On the other hand, those who bought crappy houses, and/or in unfavored and declining areas, would go on to do poorly, even if they scored favorable deals. In other words, it's better to overpay for a good product, than to get a discount on a bad one. I see this, as a member of the latter group, who paid an OK price well before the run-up to the 2007 peak.. but who nevertheless managed to sustain a long-term loss.
While some markets are notoriously frothy, such as Phoenix or Las Vegas, and some might be headed for long-term decline, such as inner San Francisco, one supposes that even now, even during the stagnant/locked-up market of summer-2023, wise people can make successful long-term purchases. Such a pity, one realizes only in hindsight, not to be wise.
The bidding wars seem to have shifted from west coast to east. In the west's bubbly markets, they're having to cut prices.
What is so difficult to understand? If prices are up 50% over the past 3 years and now prices are being "cut" by 10%, that's not a ****ing price cut. These aren't people that bought a year ago who are selling.
Those who bought quality houses in good neighborhoods of prosperous cities, did admirably well, even if they bought at a most inauspicious time, with expensive financing.. or even if they grossly overpaid. Eventually the market came around.
On the other hand, those who bought crappy houses, and/or in unfavored and declining areas, would go on to do poorly, even if they scored favorable deals. In other words, it's better to overpay for a good product, than to get a discount on a bad one. I see this, as a member of the latter group, who paid an OK price well before the run-up to the 2007 peak.. but who nevertheless managed to sustain a long-term loss.
While some markets are notoriously frothy, such as Phoenix or Las Vegas, and some might be headed for long-term decline, such as inner San Francisco, one supposes that even now, even during the stagnant/locked-up market of summer-2023, wise people can make successful long-term purchases. Such a pity, one realizes only in hindsight, not to be wise.
Find me "those who bought crappy houses, and/or in unfavored and declining areas" over the past 10 -20 years?
Find me "those who bought crappy houses, and/or in unfavored and declining areas" over the past 10 -20 years?
I'm from northeast TN. Until the pandemic, you could easily buy a house here and it not even appreciate with inflation. There's not much of a local economy, so you didn't have the net in-migration until remote work became much more popular.
Find me "those who bought crappy houses, and/or in unfavored and declining areas" over the past 10 -20 years?
Me. Bought in 2001, sold in 2021 for a substantial loss. That's a brick house, on considerable acreage in the countryside, with a pond and a creek... so we can't blame urban blight, superfund sites, homeless camps, or whatever is the bogeyman of the day.
Me. Bought in 2001, sold in 2021 for a substantial loss. That's a brick house, on considerable acreage in the countryside, with a pond and a creek... so we can't blame urban blight, superfund sites, homeless camps, or whatever is the bogeyman of the day.
Didn't say it never happens but you're the exception. Not the rule. Especially if you purchased in 2001 and sold in 2021. Either you're lying or something substantial happened in your local RE market to depress prices.
Why is it 2007 all over again?
Do you even know the conditions that caused the crash?
Read the article
Conditions of those loans are not the same as 2007.
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